CHAPTER 7. Accounting systems CONTENTS

Transcription

1 CHAPTER 7 Accounting systems CONTENTS 7.1 Correction of errors in control accounts and subsidiary ledgers 7.2 Relating journals to Trade Debtors Control account 7.3 Accounting with sales, cash receipts and general journals 7.4 Journalising transactions, posting to ledgers, preparing the trial balance, preparing a worksheet and preparation of financial statements 7.5 Sales journal with batching of invoices 7.6 Comprehensive problem

2 7.1 ADDITIONAL PROBLEMS Problem 7.1 Correction of errors in control accounts and subsidiary ledgers On 31 May the following information appeared in the books of Nessel and Rode: Balance of Accounts Receivable Control account$5478 Total of schedule of debtors$2896 Balance of Accounts Payable Control account$7368 Total of schedule of creditors$4034 Because the schedules and control account balances do not agree, an investigation was carried out. The following errors and omissions were discovered. 1. The schedule of creditors was understated by $800 due to error in addition. 2. The balance of a debtor was left out of the schedule of debtors in error, $ The total of the accounts payable column in the cash payments journal is overstated by $300 because of an addition error. 4. $160 owed by a debtor was written off as uncollectable. The write-off was recorded in the general journal, but the entry was never posted. 5. The total payment of $2875 made to creditors was debited to the Accounts Receivable Control account in error. 6. The sales journal was incorrectly added and posted as $3146. The total should have been $ A credit note given for $40 was recorded as $60 in the general journal and posted as such. 8. An invoice for $175 was recorded correctly in the purchases journal but posted to the creditor s account as $ A cheque received from a debtor for $59 was dishonoured. To record the dishonoured cheque, an entry was made in the cash payments journal but analysed in the accounts payable column in error. The posting to the debtor s account in the subsidiary ledger was done correctly. Required: Rule columns as shown below. Indicate how the errors and omissions should be corrected by inserting the amounts in the correct columns. Obtain totals for the columns and reconcile the control totals with the respective schedule totals. No. Accounts Receivable Control Schedule of Debtors Accounts Payable Control Schedule of Creditors Dr Cr Dr Cr Dr Cr Dr Cr

3 7.2 Solution No. Accounts Receivable Control NESSEL AND RODE Schedule of Debtors Accouns Payable Control Schedule of Creditors Dr Cr Dr Cr Dr Cr Dr Cr Old New

4 7.3 Problem 7.2 Relating journals to Trade Debtors Control account D. Duke uses sales, cash receipts and general journals as part of the accounting system. A trade debtors subsidiary ledger that contained the following five accounts on 30 June is also maintained: Carter and Co. Date Post Ref. Debit Credit Balance 1/6 14/6 21/6 Balance CR5 S P. Poole Date Post Ref. Debit Credit Balance 1/6 13/6 Balance CR S. Stelletti Date Post Ref. Debit Credit Balance 6/6 15/6 22/6 S8 S8 CR T. Thomas Date Post Ref. Debit Credit Balance 1/6 21/6 28/6 Balance GJ5 CR F. Polichronis Date Post Ref. Debit Credit Balance 9/6 15/6 S8 CR Required: A. Show the Trade Debtors Control account as it would appear at 30 June. B. Name the journals from which each entry in the Trade Debtors Control account was posted.

5 7.4 Solution A. D. DUKE Trade Debtors Control A/c Date Post Ref. Debit Credit Balance 1/ /6 GJ /6 SJ /6 CRJ Schedule of Accounts Receivable as at 30 June Carter & Co P. Poole 540 S. Stelletti T. Thomas F. Polichronis 540 $3 780 B. The amounts in the Accounts Receivable Control A/c were obtained: Balance balance in the account at 31 May. 21/6 Entry from GJ5 Sales Return T.Thomas posted on that date. 30/6 SJ - total of the Sales Journal (58) 30/6 CRJ totals of the Accounts Receivable and Discount allowed columns in the Cash Receipts Journal

6 7.5 Problem 7.3 Accounting with sales, cash receipts and general journals Pentland Ltd uses a sales journal, a cash receipts journal, a general journal and an accounts receivable subsidiary ledger. The terms of all credit sales are 2/10, n/30 and all accounts receivable balances as at 1 March were the result of transactions prior to 15 February. The accounts receivable subsidiary ledger balances were: R. Dikeman $ D. Frew L. Sam 540 R. Robson S. Sheen T. Jenkins $9 000 The trial balance as at 1 March included, among others, the following accounts: Account title Cash at Bank Marketable Securities Accounts Receivable Control Bills Receivable Bills Payable Sales Sales Returns and Allowances Dividend Revenue Interest Revenue Gain on Sale of Marketable Securities Discount Allowed Account balance $ The following transactions during March were recorded in the sales, cash receipts or general journals: Mar Issued a credit note to T. Jenkins for defective goods sold on credit during February, $135. Sold inventory on credit to R. Dikeman, $1440, invoice 324. Received a cheque from L. Sam for payment of a February purchase, $540. Sold inventory on credit to R. Robson, $180, invoice 325. Sold inventory on credit to D. Frew, $324, invoice 326. Received payment from R. Dikeman for invoice 324 less 2% discount. Received payment in full from T. Jenkins. Borrowed $9000 cash from the bank for 3 months at 12%. Issued a bill payable in favour of the bank to cover the loan. Sold inventory for cash, $225. Sold marketable securities that had been held as a short-term investment for $ The securities were originally purchased for $9000. Received a 60-day promissory note from R. Robson in settlement of his account receivable balance. Received a cheque from D. Frew for $2700, for payment on his account. Sold inventory on credit to L. Sam, $540, invoice 327. Received payment from L. Sam for invoice 327 less 2% discount. Required: A. Record the March transactions in the appropriate journals. Make all postings to the appropriate general ledger accounts and to the accounts receivable subsidiary ledgers. B. Reconcile the subsidiary ledger with the Accounts Receivable Control account in the general ledger.

7 7.6 Solution PENTLAND LTD Sales Journal p.1. Date Invoice. Account Post Ref Amount 3/3 324 R.Dikeman /3 325 R. Robson /3 326 D. Frew /3 327 L.Sam (1200/4100) Date Account Post. Ref. Cash Receipts Journal Cash at Bank Disc. All'd Sales Accts Rec'ble p.1. Other 9/3 L.Sam /3 R.Dikeman /3 T.Jenkins /3 Bills Pay /3 Cash Sales /3 Gain,sale of securities Market sec /3 D. Frew /3 L. Sam (1100) (5200) (4100) (1200) (x) General Journal p.1. Date Particulars Post Debit Credit Ref 1/3 Sales Returns and Allowances Accts Rec'ble Control -. T.Jenkins 150/ 135 Return of defective goods 25/30 Bills Receivable Accts Rec'ble Control - R. Robson 1200/ Receipt of promissory note (continued)

8 7.7 GENERAL LEDGER Cash at Bank /3 Balance /3 CRJ Marketable Securities /3 Balance /3 CRJ Accounts Receivable Control /3 Balance /3 GJ /3 SJ /3 GJ /3 CRJ /3 Balance c/d /3 Balance b/d 1,656 Bills Receivable /3 GJ Bills Payable /3 Balance /3 CR Sales /3 Balance /3 S /3 CR1 225 Sales Returns and Allowances /3 Balance /3 GJ1 135 Dividend Revenue /3 Balance 720 Interest Revenue /3 Balance 540 Gain on Sale of Marketable Securities /3 Balance /3 CR Discount Allowed /3 Balance /3 CR (continued)

9 7.8 Accounts Receivable Subsidiary Ledger R. Dikeman 3/3 SJ /3 CRJ D. Frew 1/ /3 S /3 CR L. Sam 1/ /3 CR /3 S /3 CR R. Robson 1/ /3 S /3 GJ S. Sheen 1/ T. Jenkins 1/ /3 GJ /3 CR B. Accounts Receivable Subsidiary Ledger R.Dikeman $- D.Frew 324 L.Sam - R.Robson - S.Sheen T.Jenkins Total $2 484

10 7.9 Problem 7.4 Journalising transactions, posting to ledgers, preparing the trial balance, preparing a worksheet and preparation of financial statements Johnson Ltd uses sales, purchases, cash receipts, cash payments and general journals along with subsidiary ledgers for trade debtors and trade creditors. The post-closing trial balance as at 31 May 2002 and the schedules of the subsidiary ledgers are presented below. JOHNSON LTD Post-Closing Trial Balance as at 31 May Cash at bank Trade debtors control Inventory Equipment Accumulated depreciationequipment Trade creditors control Share capital Retained profits Sales Sales returns Discount received Purchases Purchases returns Discount allowed Rent expense Sundry expenses Commissions expense $ $ $ $ Schedule of Trade Debtors as at 31 May 2002 Grounds Ltd Oliver Ltd S. Tay $ $5 400 Schedule of Trade Creditors as at 31 May 2002 Callis Ltd F. Arace Richards Ltd $ $7 200 (continued)

11 7.10 The following transactions took place during June 2002: June Received a cheque from S. Tay for payment on account, $1260. Sold inventory to Clay Ltd on credit, invoice 604, $1620, terms 2/10, n/30. Paid rent for June, $1350 (cheque no. 621). Paid Callis Ltd for goods purchased previously, $1800 (cheque no. 622). Purchased inventory on credit from East Ltd, $1890, invoice 883, terms 2/10, n/30. Received payment from Clay Ltd for full settlement of invoice 604. Received a credit note from East Ltd for inventory returned, $90. Paid East Ltd for the amount due on invoice 883 by issuing cheque no Paid sales commissions, $3690 (cheque no. 624). Received a cheque from Oliver Ltd in part payment of the account, $1260. Issued cheque no. 625 for new office equipment, $5400. Cash sales, $1008. Sold inventory on credit to S. Tay, $1710, invoice 605, terms 2/10, n/30. Sold inventory on credit to T. Black, $810, invoice 606, terms 2/10, n/ 30. Paid Richards Ltd for goods purchased in May, $2880 (cheque no. 626). Cash sales, $1125. Issued cheque no. 627 to cover sundry expenses, $495. Received a cheque from Grounds Ltd, $1620, for payment on account. Received a cheque from T. Black for payment of account. Required: A. Enter the transactions in the appropriate journals. B. Make all necessary postings for the month to both the general and subsidiary ledgers. C. Prepare schedules of balances in the subsidiary ledgers to prove balances in the general ledger control accounts. D. Prepare a trial balance of the general ledger as at 30 June. E. Prepare a worksheet (assume no adjusting entries). Solution A. JOHNSON LTD Cash Receipts Journal Date Account Credited Post Ref. Cash at Bank Disc. Allow Sales Accts. Recvbl. June. 1 S.Tay Clay Ltd Oliver ltd Cash Sale Cash Sale Grounds Ltd T Black Other (1100) (5020) (4000) (1110) (x) (continued)

12 7.11 Date Account Debited Cheq No Cash Payments Journal Post Ref Other Accounts Accounts Payable Purchases Cash at Bank Discount Received June 3 Rent Exp Callis Ltd East Ltd Comm.Exp Equipment Richards Ltd Sundry Exp (x) (2200) (5000) (1100) (4010) Date Invoice Sales Journal Account Post Ref. Amount 2002 June Clay Ltd S.Tay T.Black (1110/4000) Purchases Journal Date Account Post Ref. Amount 2002 June 6 East Ltd General Journal (5000/2200) Date Particulars Post Ref. Debit Credit 2002 June 10 Trade Creditors Control East Ltd 2200/ 90 Purchases returns (Returned goods) 90 90

13 7.12 B. GENERAL LEDGER Cash at Bank May 31 Bal June 30 CPJ June 30 CRJ June 30 Bal c/d Equipment May 31 Bal June 16 CPJ Accum Deprn - Equipment 1175 Trade Creditors Control May 31 Bal June 10 GJ1 90 May 31 Bal June 30 CPJ June 30 PJ June 30 bal c/d Share Capital 3300 Retained Profits May.31 Bal May 31 Bal Sales 4000 June 30 SJ June 30 CRJ Sales Returns 4005 Discount Received June 30 CPJ 136 Purchases 5000 Purchases Returns June 30 PJ June Discount Allowed 5020 Rent Expense June 30 CRJ June3 CPJ Sundry Expenses 5040 Commissions Expense June 27 CPJ1 495 June 12 CPJ

14 7.13 ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER Grounds Ltd Date Debit Credit Balance 2002 May 31 Balance June 30 CRJ Oliver Ltd Date Debit Credit Balance 2002 May 31 Balance June 13 CRJ S. Tay Date Debit Credit Balance 2002 May 31 Balance June 1 CRJ SJ Clay Ltd Date Debit Credit Balance 2002 June 2 SJ CRJ T. Black Date Debit Credit Balance 2002 June 22 SJ CRJ

15 7.14 ACCOUNTS PAYABLE SUBSIDIARY LEDGER Callis Ltd Date Debit Credit Balance 2002 May 31 Balance June 5 CPJ F. Arace Date Debit Credit Balance 2002 May 31 Balance Richards Ltd Date Debit Credit Balance 2002 May 31 Balance June 23 CPJ East Ltd Date Debit Credit Balance 2002 June 6 PJ GJ CPJ C. Schedule of Accounts Receivable Schedule of Accounts Payable as at 30 June 2002 as at 30 June 2002 $ $ Grounds Ltd - Callis Ltd - Oliver Ltd F.Arace S.Tay Richards Ltd - Clay Ltd - East Ltd - T.Black - $2 520 $2 970

16 7.15 D. JOHNSON LTD Trial Balance as at 30 June 2002 Debit Credit 1100 Cash at bank Trade Debtors Control Inventory Equipment Accum Deprn Equipment Trade Creditors Control Share Capital Retained Profits Sales Sales returns 4010 Discount Received Purchases Purchases Returns Discount allowed Rent expense Sundry expense Commissions Expense $44919 $ (continued)

17 7.16 E. Solution Johnson Ltd Worksheet for the year ended 30 June 2002 Statement of financial position Unadjusted trial balance Adjustments Adjusted trial balance Statement of financial performance Account title Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash at Bank Trade Debtors Control Inventory Equipment Acc. Depr. - Equip Trade Creditors Control Share Capital Retained Profits Sales Sales Returns Discount Received Purchases Purchases returns Discount Allowed Rent Expense Sundry Expense Commissions Expense Net Loss

18 7.17 Problem 7.5 Sales journal with batching of invoices Lauren Wadensky uses a sales journal in her business. Her accountant posts to customer accounts in the accounts receivable subsidiary ledger from copies of sales invoices on a daily basis. Sales invoices details are entered into the sales journal daily by batch totals. The following sales were made during the second week of April : Date April Total sales $ Invoice numbers Required: Prepare the sales journal for the week. Explain how this journal would be posted to the general and subsidiary ledgers. Solution LAUREN WADENSKY Sales Journal Date Invoice numbers Amount 10/ $ / / / / $ In the general ledger: debited to Accounts Receivable Control account; credited to Sales account. In the subsidiary ledger: no postings would be made to this ledger. All postings relating to credit sales would have been made directly from duplicate invoices to the individual accounts on a daily basis.

19 7.18 Problem 7.6 Comprehensive problem The post-closing trial balance of Hayden Ltd at 1 September contained the following normal balances: Account title Cash at Bank Trade Debtors Bills Receivable Inventory Prepaid Insurance Delivery Vehicle Accumulated DepreciationDelivery Vehicle Office Equipment Accumulated DepreciationOffice Equipment Trade Creditors Bills Payable Share Capital Retained Profits Sales Sales Returns and Allowances Discount Received Purchases Purchases Returns and Allowances Discount Allowed Rent Expense Electricity Expense Salaries Expense Account balance $ Subsidiary ledger balances at 31 August were: Trade Debtors Customer Date of sale Terms Amount A. Capper B. Franks M. Grundy 29 August 31 August 16 August 2/10, n/30 2/10, n/30 2/10, n/30 $ Trade Creditors Creditor Date of purchase Terms Amount Douglas Ltd J. Murray Lennon Ltd 18 August 10 August 22 August 1/30, n/60 n/30 1/15, n/30 $ (continued)

20 7.19 Transactions for the month of September were: Sept Bought inventory from J. Murray on credit, $2400; terms n/30. Purchased 1 year s insurance cover for $900, cheque no Inventory sold to B. Franks last month was returned. Issued a credit note for the amount of $105. Received a cheque from A. Capper to cover the sale made on 29 August. Paid Lennon Ltd cheque no for purchase of 22 August. Purchased inventory from Douglas Ltd on credit, $2400; terms 1/10, n/60. Issued cheque no for $1005 to J. Murray on account, and issued a 60-day 10% bill payable for the balance due on the purchase of 10 August. Paid September rent of premises $540, cheque no Paid Douglas Ltd for the purchase of 18 August, cheque no Sold inventory on account to E. Arnold, $4500; terms 2/10, n/30. Received cash for the issue of additional share capital, $ Received cheque for $1125 from M. Grundy in part payment of the sale made on 16 August, together with a bill receivable for the balance due. Sold merchandise to A. Capper on account, $4800; terms 2/10, n/30. Purchased goods on credit from Lennon Ltd, $3600; terms 1/15, n/30. Paid fortnightly salaries by cheque no. 3405, $1080. Cash sales from 1 September to 14 September, $8250. Sold goods to M. Grundy on account, $4650; terms 2/10, n/30. Received a credit note from Lennon Ltd for $75 for defective goods returned. E. Arnold forwarded a cheque for $1200 on account; no discount was allowed. Purchased goods for cash. Issued cheque no for $5400. Received a cheque from A. Capper for $605 and a promissory note for the balance of his account; no discount was allowed. M. Grundy forwarded a cheque for the goods sold on 18 September. Paid Lennon Ltd for the purchase made on 14 September, cheque no Paid fortnightly salaries with cheque no. 3408, $1080. Electricity account paid by cheque no. 3409, $210. Cash sales from 15 September to 30 September, $9750. Purchased inventory on credit from Lennon Ltd, $3300; terms 1/15, n/30. Required: A. Record the September transactions in appropriate special journals and the general journal. B. Open the accounts for the general ledger, and enter the balances at 1 September. C. Open running balance accounts in the subsidiary ledgers and enter the opening details of these accounts. D. Post from the journals to the appropriate running balance ledger accounts. E. Prepare a trial balance as at 30 September. F. Prepare schedules of trade debtors and trade creditors as at 30 September.

21 7.20 Solution A. HAYDEN LTD Sales Journal p.1. Date Invoice No. Account Post. Ref. Terms Amount 10/9 E.Arnold 2/10, n/ /9 A.Capper 2/10, n/ /9 M.Grundy 2/10, n/ (1120/4110) Purchases Journal p.1. Date Account Post. Ref. Terms Amount 1/9 J.Murray n/ /9 Douglas Ltd 1/10, n/ /9 Lennon Ltd 1/15, n/ /9 Lennon Ltd 1/15, n/ (5110/2110) General Journal Date Particulars Post Ref. Debit Credit 2/9 Sales Returns and Allowances Trade Debtors B. Franks 1120/ 105 Return of goods from B. Franks 5/9 Trade Creditors J. Murray 2110/ Bills Payable Bill sent in part payment. 11/9 Bills Receivable Trade Debtors M. Grundy 1120/ Promissory note received from M. Grundy. 19/9 Trade Creditors Lennon Ltd 2110/ 75 Purchases Returns & Allow Returned goods to Lennon Ltd. 21/9 Bills Receivable Trade Debtors A.Capper 1120/ Promissory note received from A.Capper

22 7.21 Date Accounts Credited Cash Receipts Journal Post. Ref. Cash at Bank Disc. Allowed Trade Debtors Sales Other 3/9 A.Capper /9 Share Capital /9 M.Grundy /9 Cash sales /9 E.Arnold /9 A.Capper /9 M.Grundy /9 Cash sales (1100) (5120) (1120) (4110) (x) p.1. Date Account Ch. No. Cash Payments Journal Post. Ref. Other Trade Creditors Purch. Cash at Bank p.1. Disc. Rec'd 1/9 Prepaid Ins /9 Lennon Ltd /9 J.Murray /9 Rent exp /9 Douglas Ltd /9 Salaries exp /9 Purchases /9 Lennon Ltd /9 Salaries Exp /9 Electricity (x) (2110) (5110) (1100) (4120)

23 7.22 B. and D. General Ledger Cash at Bank / /9 CR /9 CP Trade Debtors / /9 GJ /9 GJ /9 GJ /9 S /9 CR Bills Receivable / /9 GJ /9 GJ Inventory / Prepaid Insurance /9 CP Delivery Vehicle / Accm. Depr. - Delivery Vehicle / (continued)

24 7.23 Office Equipment / Accum. Depr. - Office Equipment / Trade Creditors / /9 GJ /9 GJ /9 PJ /9 CP Bills Payable /9 GJ Share Capital / /9 CR Retained Profits / Sales /9 S /9 CR (continued)

25 7.24 Sales Returns and Allowances /9 GJ Discount Received /9 CP Purchases /9 PJ /9 CP Purchases Returns and Allowances /9 GJ Discount Allowed /9 CR Rent Expense /9 CP Electricity Expense /9 CP Salaries Expense /9 CP /9 CP

26 7.25 C. Trade Debtors Subsidiary Ledger A. Capper 31/ /9 CRJ /9 SJ /9 CRJ /9 GJ B. Franks 31/ /9 GJ M. Grundy 31/ /9 CRJ /9 GJ /9 SJ /9 CRJ E. Arnold 10/9 SJ /9 CRJ

27 7.26 Trade Creditors Subsidiary Ledger Douglas Ltd 31/ /9 PJ /9 CPJ J. Murray 31/ /9 PJ /9 CPJ /9 GJ Lennon Ltd 31/ /9 CPJ /9 PJ /9 GJ /9 CPJ /9 PJ F. Schedule of Trade Debtors Schedule of Trade Creditors as at 30 September as at 30 September B.Franks $2 070 Douglas Ltd $2 400 E. Arnold Lennon Ltd $5 370 $5 700

28 7.27 E. HAYDEN LTD Trial Balance as at 30 September Debits Credits Cash at bank $ Trade debtors Bills receivable Inventory Prepaid insurance Delivery Vehicle Accum. depr. - delivery vehicle $ Office equipment Accum. depr. - office equipment Trade creditors Bills payable Share capital Retained profits Sales Sales returns and allowances Discount received Purchases Purchases returns and allowances Discount allowed Rent expense Electricity expense Salaries expense $ $